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Inflation Over Time is a Significant Personal Risk

Inflation Over Time is a Significant Personal Risk

November 5, 2021

Inflation is a hot topic these days, writes Peter Watson. 

People are concerned about the increased cost of groceries and higher price of gasoline for their cars. There is always the risk that when homeowners renegotiate their mortgage at the end of its term, interest rates will be higher.

Inflation decreases the purchasing power of your money. The impact can be devastating.

If you are planning to have a financially secure retirement that could last decades, there is a real risk that the purchasing power of your money will be greatly diminished.

As an example of how the purchasing power of money changes over time, let’s consider how much people earned years ago to how much things cost today.

Many baby boomers started their career at an annual salary that in today’s value of a dollar would account for about a one-month cost in a retirement home.

The longer from now that your money is needed, for example retirement, the more the decline of purchasing power of a dollar is a significant risk.

Our recommendation is to estimate the cost of items in the year of your anticipated purchase. Ask your financial advisor to review your potential living costs over the anticipated length of your life that includes an annual adjustment for inflation.

Use that information to help design your savings plan and investment portfolio based on your long-term needs.

Inflation is a significant risk that needs your focus.

Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Watson Investments –